Business View: Misplaced one billion? You can run the economy

26 trillion reasons to worry about the deputy governor of the Bank
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The Independent Online

Even if you say it quickly, £26,527,108,436,994 is a lot of money. It equates to 1.3 times the GDP of the entire planet, more than 100 times the US budget deficit and 2,000 times the annual budget of the Home Office. It is also the amount the National Audit Office (NAO) came up with when it totted up all the debits and credits recorded by the Home Office in the financial year 2004-05 on its whiz-bang new accounting system.

No wonder the department had to make gross adjustments totalling more than £1bn to its accounts after they were filed. It seems that offenders from overseas are not the only things the Home Office is unable to keep track of.

All this would be shocking in a normal context. But what happened to the permanent secretary, Sir John Gieve, after a thousand prisoners and a billion quid was misplaced is the interesting thing. He was tipped to become permanent secretary at the Treasury - but lost out to Nicholas Macpherson. So, as a consolation prize, he was made deputy governor of the Bank of England.

Now I have nothing against Sir John. He lives around the corner from me, supports Arsenal, is the governor of a local primary school and used to share a flat with one of my colleagues. But I worry about the Government's attitude to the Bank of England.

Appointments are made by the Queen on the advice of both the Prime Minister and the Chancellor of the Exchequer. They are not vetted, as in the US, by parliamentary committees. Like many things this Government does, the process is rather opaque.

Presiding over financial incompetence is no bar to being put into such a key role in the economy. This was shown when Rachel Lomax, who is a good egg and fully deserves her job, became deputy governor in 2003. But there was no mention of her three years as permanent secretary at the Department for Work and Pensions, during which fraud and errors in the benefits system rose to £3bn a year, leading to the 2001-02 accounts being qualified by the NAO. Perhaps she did her best and there was a good excuse. But the question was never asked - at least not in public - so we'll never know the answer.

Sir John, as we point out elsewhere, was appointed deputy governor in October and took up the job in January. By the Home Office's own admission, it was fully aware of the fact that it had lost track of more than 1,000 prisoners from foreign countries by July. Charles Clarke, the Home Secretary, told the Prime Minister before Christmas. The audit of the Home Office accounts during which it emerged that the figures were wrong by a factor of 2,000 was completed in November.

So even if the PM and the Chancellor did not know that Sir John's grip on his department was buttery when it appointed him, at least the PM knew, and both should have known, they were foisting damaged goods on the Bank of England by the time he arrived in January. Did they think the whole thing would be swept under the carpet? Did they think Sir John had learned his lesson? Did they care?

The Brady bunch

It was victory last Thursday for Amvescap in its bid to pay its former chairman Charles Brady $9m (£5m) that he hardly needs for fending off a takeover bid. With the likes of Scottish Widows, Morley and F&C objecting, the company's remuneration report was approved by a resounding 51.6 per cent to 48.4 per cent.

But hold on - more than 18 per cent of Amvescap is held by the Amvescap Employee Stock Ownership Plan, the Amvescap Global Stock Plan and the Amvescap Share Option Trust. When I called the fund management group to ask whether these shares voted in favour of the Brady payment, and who were the trustees of these plans, there was a stony silence.

I'm sure there's a very good explanation.

j.nisse@independent.co.uk

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